The Church, Nonprofits, and Taxes | Dimitri Cavalli | Catholic World Report
Guidelines for nonprofits are often misunderstood. And they are sometimes misrepresented by those seeking to quiet churches.
Every so often, there are calls for the federal government to revoke the tax-exempt status of churches. The most common arguments made for taxing churches are that exemptions deny the government important sources of revenue to pay its bills, and that many churches (usually the ones that continue to teach traditional sexuality morality such as the Catholic, Evangelical, and Mormon churches) often abuse their tax-exempt status by violating IRS guidelines that prohibit them from engaging in political activity. The chronic obsession with the activities of the churches in the public square has obscured the fact that they are only a part of the overall nonprofit sector. According to data collected by the National Center for Charitable Statistics (NCCS), there are over 1.5 million registered nonprofit organizations (with combined total assets of nearly $5.7 trillion as of August 2012) in the United States today—many of which are nonreligious institutions and organizations that, like churches, seek to influence public policy despite being tax-exempt.
Houses of worship and charities are registered with the IRS as 501 (c) (3) nonprofit organizations. Since financial contributions to 501 (c) (3) nonprofits are tax-deductible, donors have the incentive to open their wallets.
IRS guidelines for nonprofits—which are available on the agency’s Web site—are often misunderstood. While many people use these terms interchangeably, the IRS specifically defines “politics” as seeking to influence the election of candidates and “lobbying” as seeking to influence legislation.
According to the IRS, all 501 (c) (3) nonprofits cannot endorse or oppose candidates for elected office and make financial contributions to political campaigns. In 1964, the liberal Protestant magazine Christian Century lost its tax-exempt status for one year after it endorsed President Lyndon Johnson for re-election.
Nonprofit organizations, however, can certainly praise or criticize candidates, elected officials, political parties, and their stands on public policy issues and controversies without specifically telling people to vote for or against them. This is what many nonprofits have been doing since the passage of the 1954 Internal Revenue Act, which added section 501 (c) to the federal tax code that specified the types of organizations that qualified for tax-exemption.